Obama Says ATMs Are to Blame for High Unemployment

June 16, 2011 - 12:44am

by Nick Coons

Leaving no industry unturned, President Obama has taken a swipe at the presence of ATMs, blaming them and other automated service machines for high unemployment, because they take the place of human workers. Where to begin?

I have at least two issues with this line of thinking. The first one is empirical. ATMs have been in use in the U.S. since the 1960s. Was there a massive implementation of new ATMs that took place in the past two years? It seems there were quite a few ATMs in use five years ago when the unemployment rate was significantly lower. Obama is not stupid, so he must think very little of his audience if he thinks this is going to go unnoticed.

However, the second issue I take with this is much more subtle, but symptomatic of the way not only Democrats, but Republicans, and many others view the economy. Let me be very clear about the point I'm making, and then I'll explain as best as I can -- The purpose of an economy is not to create jobs!

Democrats, Republicans, and every other politician has it wrong when they talk about what they're going to do to create jobs. Because it's not a politician's role to create jobs? Well yes, but what I'm getting at is even more fundamental. If you want a strong economy, you must first understand the purpose of an economy in order to know if you want it to be strong (if you don't understand the purpose of a house's foundation, then you cannot rationally say you want a strong foundation), then you have to know what makes it strong.

The purpose of an economy is to facilitate the the trading of goods and services among humans so that we can more easily and efficiently acquire the things we want and need. One key difference between humans and other animals is our ability to specialize. I don't grow my own food, build my own house, make my own clothes, etc. I do one job (or a small handful of them), and I do them well. I do them so well that I create an excess, and I trade the excess with other people who also create an excess. This creates a non-zero sum environment, where we all benefit from the voluntary labor of other people instead of trying to do everything ourselves in a half-assed sort of way.

The economy is what we call the act of humans trading with each other, and they trade with each other for their own benefit. When people have the ability to specialize and trade, they find it to be in their best interest to find new ways to maximize their efficiently. The more excess they can create, the more they have available to trade with others. This efficiency maximizing process includes creating new procedures and tools that decrease the amount of time and effort needed to do the same job. For instance, many crops are no longer picked by hand; there are machines that do that. When these machines were put into use, the people that used to pick crops by hand lost their jobs, but it also means that they were freed up to focus their efforts on other things, such as starting businesses that manufacturer and sell crop-picking machines.

The process of creating more and more efficient practices actually destroys jobs, but only momentarily. And while the people that lose their jobs suffer until they find or make new jobs, this is a necessary process, and attempting to hinder it through state processes has a far more devastating effect. When one family has only the ability to grow enough food for their own consumption, then every family must spend their time farming, and no one is free to spend their time doing anything else. But when machines are created that increase efficiency such that one family can produce enough food for 10 families, then nine families would be temporarily considered unemployed while they find new work. And this is where human progress is made, because if everyone was spending all of their time producing the food needed to keep them alive, then there would be no resources free to progress beyond that point, despite that the fact the unemployment rate would be near zero.

In a free market, the unemployment rate is always low but constantly fluctuating as new enhancements (like cars, airplanes, the internet, etc) are introduced into our lives. It's only in a non-free market where the unemployment rate goes high and stays high. While the jobs will come if the market is freed, this is only the effect of a strong economy. But cause must come before effect. You do not become a good athlete (effect) in order to train hard (cause), you do not become wealthy (effect) in order to work hard (cause), and you do not create jobs (effect) in order to build a strong economy (cause).